ING throws lifebelt into home loans
Sunday 08 October 2006
ING Direct has achieved a high profile through one product - the simple savings account with its famous orange-lifebelt logo. Now the company hopes to work the same marketing magic as it branches out into the UK mortgage market. As with the savings product, ING says it will steer clear of confusing fees and catches.
"The loan rates people are offered are not what they seem, and mortgages come with a range of nasty surprises," says Lindsay Sinclair, the chief executive of ING. Such fees include those for "telegraphic transfer of funds" (an average of £29); an administration redemption charge (£191); and a valuation administration fee (£68).
ING estimates that these three charges cost British homebuyers £705m a year. Separately, "exit fees" are already under investigation by City regulator the Financial Services Authority, which is due to report back later this year.
So what do you get with ING? The firm offers a two-year, fixed-rate deal at 4.95 per cent and a variable-rate one at 5.14 per cent.
The former has a £495 arrangement fee and refunds the basic valuation fee for homebuyers; remortgagers don't pay for legal services or the valuation. The early-repayment charge (ERC) is 1 per cent of the outstanding loan.
With the variable-rate product, there's neither an arrangement fee nor any ERC. ING says that this deal will always be less than 0.9 per cent above the Bank of England base rate.
Mortgage brokers have welcomed the bank's effort to introduce greater clarity for consumers, but are lukewarm on its rates.
"We thought ING would have made a bigger splash; it's a bit ordinary," says David Hollingworth of London & Country. "The rates do not standout when compared with others in the market, and the bigger the mortgage, the more emphasis will be placed on a cheaper interest rate."
For the fix, he compares ING with Nationwide, which offers a two-year deal at 4.47 per cent but with a high, £1,499 arrange- ment fee (and an extra £99 for remortgages). It also has a £90 exit fee, unlike ING.
"However, for borrowers after a £200,000 interest-only remortgage, the Nationwide loan would work out £817 cheaper than the ING rate," he says.
There is flexibility with ING's variable deal - you can overpay as much as you like - and this is "really good", says Mark Harris of broker Savills Private Finance. But ING can change the variable rate as it sees fit, he warns. "Unlike a base rate tracker, there is no set margin - just a 0.9 per cent cap that is quite high".
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